(Adds information, quote) MEXICO CITY, Jan 27 (Reuters) - Mexico’s central bank said on Wednesday the country’s short-term economic policy needs to focus on attracting more investment and reducing internal economic uncertainty to help steer a sustained recovery from the impact of the coronavirus pandemic. In a report, the central bank said Mexico should continue working to correct institutional and structural problems that have led to low levels of investment and productivity. Latin America"s No. 2 economy is headed for an estimated 8.8% contraction in 2020 after the government imposed a series of coronavirus restrictions to stem the spread of infections, though new cases are still surging. (Graphic: tmsnrt.rs/34pvUyi) The bank said shocks to inflation had complicated monetary policy and warned that the Mexican economy would continue to face an uncertain environment in 2021. There would be important challenges to the reactivation of aggregate demand, but the economy would gradually recover, the bank said. The bank cautioned in its report that economic policy must not put at risk the strength of macroeconomic fundamentals and that it must respect the institutional environment. “For the best fulfillment of the purposes of this central bank, autonomy is required in the exercise of its functions and its administration,” the bank said. The government of President Andres Manuel Lopez Obrador has sought to renegotiate contracts it sees as unfavorable to the government, particularly in the energy sector. Last month, a proposed congressional reform called on the central bank to buy up foreign cash that banks cannot offload, prompting the institution to warn it could undermine the financial system by forcing the bank to absorb money of illicit origin. The lower house of Congress is due to take up the legislation again in February but is expected to produce a watered-down version. The impacts of the coronavirus pandemic, which is worsening in Mexico, could continue to have persistent effects in some sectors and regions, the bank said. It urged the government to continue with efforts to strengthen to rule of law and tackle corruption.